Issues of market efficiency in the Chinese stock markets: I. Day-of-the-week effect, month-of-the-year effect and turn-of-the-month effect in China's stock markets. II. Are the two stock markets (Shanghai and Shenzhen) in China integrated or segmented?

This study addresses the issues of market efficiency in the Chinese stock markets and presents three essays which all have implications for market efficiency.; Essay 1 examines day-of-the-week, month-of-the-year and turn-of-the month effects in the Chinese stock markets. For the Shanghai and the Shenzhen stock markets, we find no evidence for a significant negative "Monday effect" and a significant positive "January effect". However, volatility as measured by the standard deviation is highest on Monday in both markets. We find strong evidence that a significant negative "Tuesday effect" and a significant positive "Friday effect" exist in the Shanghai stock market, and weak evidence that they exist in the Shenzhen stock market. We divide the trading month as that the first period is from the last trading day of the prior month to the sixth trading day of the current month, and the second period contains the remaining trading days of the current month. With this partition, we find strong evidence for a significant turn-of-the-month effect in both markets---mean daily returns are higher during the first period and differences between the first and the second periods are statistically significant.; Essay 2 tests whether the Shanghai stock market and the Shenzhen stock market are integrated or segmented by using the cointegration method. We find that these two markets are integrated but do not have identical risk characteristic.; Essay 3 evaluates the effects of re-imposing a 10% price limit on the Chinese stock markets. We do not uncover significant evidence to support the hypotheses that volatility of stock market returns in the post-limit period should be significantly less than in the pre-limit period and serial autocorrelations of stock market returns in the post-limit period should be significantly longer and stronger than in the pre-limit period in both markets. In fact, volatility is slightly exacerbated and the structure of the serial autocorrelations remains unchanged with a price limit imposition in both markets.; Our study suggests that both the Shanghai and the Shenzhen stock markets are inefficient and the Chinese government should deregulate the markets.